The New Development Bank approved $100 million in development financing for an energy project in Russia to cap off its first tranche of projects — mostly on renewable energy — worth $911 million during its inaugural annual meeting in Shanghai, China, last week. The initial investments hew closely to the bank’s commitment to finance green and sustainable programs in its five founding countries: Brazil, Russia, India, China and South Africa.
“Our first set of loans the bank has begun the process of establishing [the NDB’s] credentials as an institution that supports green and sustainable infrastructure," NDB President K. V. Kamath said during the opening ceremonies of the Shanghai-based institution's first annual meeting on July 20. He said that the NDB “will strive to make a positive difference quickly and effectively.”
Maasdorp on BRICS bank's 'openness' and unique place in the MDB world
Leslie Maasdorp, vice president and chief financial officer of BRICS' New Development Bank, speaks to Devex about his bank’s progress a year after its operational launch, its unique characteristics as a multilateral institution, as well as its procurement and recruitment opportunities moving forward.
The first batch of projects approved in April includes renewable energy programs in India and Brazil valued at $250 million and $300 million, respectively. An $81 million solar rooftop project in China was also approved. These inaugural projects are expected to reduce carbon emissions by 4 million tons annually while generating 2,370 megawatts of additional renewable capacity to these founding countries.
The announcements helped the annual meeting conclude on a positive note, leaving development professionals, civil society leaders, and bank officials optimistic about the potential for the NDB to finance green and sustainable development projects. Still, concerns persist over the transparency and thoroughness of the bank’s environmental standards and other policies. And some question just how different the bank will be from existing multilaterals.
“The big question is whether the institution wants to be a new bank to an old development model or a bank for a new development model,” Adhemar Mineiro, economist and advisor to the executive secretariat of Rede Brasileira pela Integração dos Povos, said in a statement a day after the event, stressing the need for the bank to set parameters for the sectors and types of investments it will make to ensure sustainable development support.
A ‘new’ bank?
The development community watched the founding of the NDB — also known as BRICS bank — with interest, curious particularly about what would be “new” about the Shanghai-based development bank.
NDB officials used the annual meeting to showcase the features they hope will differentiate the financial institution from its peers, said Caio Borges, a lawyer at the Sao Paulo-based group Conectas, who attended the Shanghai meeting.
“It was interesting in the sense that NDB really sees itself as a new development bank,” he said. “They have been saying this rhetoric that they will do something new. But now I think they wanted to make the case that it's not an empty rhetoric.”
One point bank officials have consistently emphasized is the $100 billion bank’s ability to take decisions quickly and efficiently. Leslie Maasdorp, the bank's vice president and chief financial officer, told Devex in a previous interview that these features — along with many others — carved out NDB's unique position in the multilateral development community.
Some of these unique approaches include faster approval and implementation of programs. The World Bank takes an average of 18 months — or more — to prepare and approve a project, for example, while the NDB is striving to do the same in six. For now, the NBD has the advantage of managing only five member countries’ goals, as opposed to the World Bank’s 189. Though the NBD has promised to eventually open up membership to new countries.
Another differentiating characteristic: The NDB “said that they wanted to be a green bank on both the funding and lending side,” Borges told Devex, highlighting the Shanghai-based institution’s goal of pursuing sustainability on all aspects of operations.
“There was also a lot of talk about the bank being more responsive to the needs of emerging countries. The bank will provide more solutions [to emerging countries] and will become more flexible,” he said.
Finally, Borges said he had noted the senior management's emphasis on becoming a results-based institution, including by utilizing country systems in safeguards and procurement.
“This is how they want to operate. They said they want to create cases that they want to prove that it is possible for countries to use their own systems and strengthen them and improve in terms of implementation,” he said. “They want to make the case that it is possible … to achieve development outcomes by using domestic systems.”
Civil society engagement
Despite the bank's early milestones, civil society representatives remain concerned about the bank’s commitment to transparency and its openness to collaboration.
“One of the main points of civil society, and also journalists, is that the bank has been operating with a sort of a lack of transparency so we don't know much information except the press releases or the public speeches,” Borges said, adding that this is important as the bank is already operating and approving projects for a year.
For example, the bank has reportedly approved an information disclosure policy, though it is not clear what policies will be publicly available on the bank’s website. The policy was publicly announced by bank vice president and chief risk officer Paulo Noguiera Batista Jr. during the Shanghai event, according to the Conectas official.
Borges and other participants at the meeting told Devex that one of the reasons given by bank officials over the lack of disclosure of policies is its limited capacity, given staffing constraints. But they warned that this lack of transparency could contribute to the potential for conflicts with communities on the ground.
“By avoiding dialogue with civil society, NDB risks getting into social conflicts,” said Vladimir Chuprov, head of Greenpeace Russia Energy Program.
“[NDB] should recognize that civil society is diverse … and these views and perspectives should be recognized and respected,” Borges concluded. “The bank should have a structured process of engaging with the whole spectrum of civil society … and not just those who applaud the bank but those who also make criticisms.”
Operational challenges
Meeting participants told Devex that they shared concerns about process and organizational capacity. One local development professional present at the meetings told Devex on the condition of anonymity that although it was a significant step forward for NDB to hold its inaugural annual meeting, the young institution lacks in operational efficiency.
“I get a sense that their vice presidents' division of work is still quite unclear,” the local development practitioner told Devex. “They need to manage internal risks [like] how to balance different views among [the] five countries.”
While the inaugural annual meeting served as a good platform for dialogue and discussion for bank officials with the rest of the international development community, NDB remains a work in progress both in its day-to-day operations as well as in its engagement with other stakeholders. What’s next, as Borges mentioned, is for the Shanghai-based institution to make that rhetoric a sustainable reality on the ground.
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